In one of the weirder moves I’ve seen over the past decade-plus that I’ve been going to Sacramento, Assemblyman Joe Coto and Mercury Insurance did not show up for the Judiciary Committee hearing of their bill (AB 1054) yesterday.  They didn’t even tell the Committee that they were ditching the debate.  The bill would prohibit judges or regulators from ordering refunds when an insurer is found to be illegally overcharging customers. 

Coto’s move was particularly impolitic because the Assembly Judiciary committee staff worked over the weekend to analyze his proposal in order to give him a chance to move the bill this year.  The bill was already behind the timetable 8-ball, because Coto had kept it hidden from the public until he gutted and amended an unrelated bill on April 13th.  At the April 22nd Insurance Committee hearing, Judiciary Chairman Mike Feuer noted that the bill would be heard in his committee in the next week and several Insurance Committee members who had expressed some concerns about the bill seemed to give Insurance Committee Chair Coto an Aye vote with the understanding that this last minute bill would have another hearing.

This was not a last-minute bill, by the way, because the author held time consuming negotiations to craft good public policy.  Just the opposite.  AB 1054 was a virtual retread of a failed Mercury Insurance bill
from last year — the Assemblyman never even asked for the opinion of the
consumer groups that worked to defeat the bill last year. By keeping the bill a secret for so long, Mercury and Coto were hoping to win a tactical battle, not a policy debate. 

What made it all so bizarre (but in some ways the only move they had) was that the Mercury/Coto no-show seemed to be a protest of sorts.  Mercury Insurance, which is known for its combination of political largesse and arrogance, must have felt that they had every right to push their anti-accountability bill through the Assembly with, well, no accountability.  

But, really, it just doesn’t make sense:  Coto and Mercury keep their intentions secret until the very last minute, dump the bill before anyone has much time to get a handle on it (to this day, I don’t believe Assemblyman Coto, or anyone, can explain the purpose or effect of the bill’s provision related to credit card payments for insurance), and then they have the gall to protest the compressed process by standing up the Judiciary Committee.

Hopefully, yesterday was the fittingly odd ending to this bill’s short but ugly life. 

For a little more insight into the bill itself, here’s Consumer Watchdog’s synopsis of AB 1054 with a link to our detailed letter:

Perennial big donor Mercury Insurance has teamed up with Assembly Insurance Committee Chairman Joe Coto (D-San Jose) to make insurers unaccountable when they violate the law and overcharge customers.  The bill, AB 1054, would prohibit judges or regulators from ordering refunds when a company is found to be illegally overcharging customers.

Several insurance companies, including Mercury, have refunded tens of millions of dollars to customers who were illegally surcharged in recent years and, last year, Allstate Insurance lowered homeowners insurance by $250 million under the threat of potentially paying hundreds of millions more in refunds.  The Coto legislation – AB 1054 – would allow insurers to overcharge customers without fear of ever having to pay refunds.
 
In its letter to Chairman Coto, Consumer Watchdog noted that the lessons of the Wall Street meltdown should push for greater accountability not less.  The group wrote "AB 1054 would lead to higher insurance rates, more discrimination, and less accountability in California’s insurance marketplace."
 
AB 1054 is an illegal amendment to voter-approved insurance reform Prop 103, which only allows amendments that "further its purpose."  If this bill were to become law, it would be struck down by California courts, like its predecessor bill from 2003 (SB 841- Perata).  Consumer Watchdog notes that defending this bill in court would be a huge waste of taxpayer resources at a time of fiscal crisis.